The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the place of provision of the service of transportation of goods by air/sea from a place in India to a place outside India will be a place outside the taxable territory and not liable to service tax.
Progeon Global Forwarding Pvt. Ltd, the appellant assessee was engaged in arranging transportation of export and import cargo of their customers in containers by sea/air through the shipping lines/airlines, and the assessee collected charges from their customers as Ocean Freight both in the case of imports and exports.
The assessee appealed against the order passed by the adjudicating authority for confirming the demand for service tax of Rs. 69,97,883/- along with appropriate interest and imposed penalties under section 78 of the Finance Act, 1994.
S. Adithya, the counsel for the assessee contended that rule 9 of the Place of Provision of Services Rules( POPS), 2012 should also be kept in mind wherein the place of provision of intermediary services is the location of the service provider.
Further submitted that an intermediary had been defined, in rule 2(f) of the POPS Rules as one who arranges or facilitates the provision of a service or a supply of goods between two or more persons, but does not include a person who provides the main service or supplies the goods on his account.
Rudra Pratap Singh, the counsel for the department contended that nine major activities were undertaken by Freight Forwarders as per trade parlance. However, in the absence of documentary evidence and demonstrable facts, the assessee had not listed out the activities undertaken by them, which could be compared with the trade practice.
The Bench observed that a freight forwarder, when acting as a principal, will not be liable to pay service tax when the destination of the goods was from a place in India to a place outside India.
The two-member bench comprising P.Dinesha (Judicial) and Ajit Kumar (Technical) held that the assessee was not covered under the category of intermediary, which by definition excludes a person who provides a service on his account.
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